Answered step by step
Verified Expert Solution
Link Copied!
Question
1 Approved Answer

The financial statements for Royale and Cavalier companies are summarized here: Royale Company Cavalier Company Balance Sheet Cash $ 3 5 , 0 0 0

The financial statements for Royale and Cavalier companies are summarized here:
Royale Company Cavalier Company
Balance Sheet
Cash $ 35,000 $ 55,000
Accounts Receivable, Net 65,00026,000
Inventory 130,00045,000
Equipment, Net 570,000180,000
Other Assets 150,00056,000
Total Assets $ 950,000 $ 362,000
Current Liabilities $ 140,000 $ 35,000
Notes Payable (long-term)210,00075,000
Common Stock (par $20)490,000220,000
Additional Paid-In Capital 60,00014,000
Retained Earnings 50,00018,000
Total Liabilities and Stockholders Equity $ 950,000 $ 362,000
Income Statement
Sales Revenue $ 830,000 $ 310,000
Cost of Goods Sold 490,000160,000
Other Expenses 250,000105,000
Net Income $ 90,000 $ 45,000
Other Data
Per share price at end of year $ 19.00 $ 17.00
Selected Data from Previous Year
Accounts Receivable, Net $ 57,000 $ 24,000
Notes Payable (long-term)210,00075,000
Equipment, Net 570,000180,000
Inventory 105,00048,000
Total Stockholders' Equity 600,000252,000
These two companies are in the same business and state but different cities. Each company has been in operation for about 10 years. Both companies received an unqualified audit opinion on the financial statements. Royale Company wants to borrow $85,000 cash and Cavalier Company is asking for $40,000. The loans will be for a two-year period. Both companies estimate bad debts based on an aging analysis, but Cavalier has estimated slightly higher uncollectible rates than Royale. Neither company issued stock in the current year. Assume the end-of-year total assets and net equipment balances approximate the years average and all sales are on account.
Required:
Calculate the following ratios. (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal places.)
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image
Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Cost Accounting Theory And Practice

Authors: R. Palaniappan, N. Hariharan

1st Edition

9380578342, 978-9380578347

More Books

Students explore these related Accounting questions